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Bloomberg: Chevron’s Gorgon Venture Design Work to Finish in `Few’ Months

By Angela Macdonald-Smith

Sept. 29 (Bloomberg) — Chevron Corp. said design work on the $10.4 billion Gorgon liquefied natural gas venture, which has been delayed, is due for completion in the “next few months” in advance of an investment decision in 2007.

The number of contractors working on the project is set to fall over the next few weeks as the initial engineering and design work nears completion, Chevron said today in an e-mail from the San Ramon, California-based company’s Perth office in Western Australia. Exxon Mobil Corp. and Royal Dutch Shell Plc have stakes in the venture.

Chevron is counting on the project to boost its share of the expanding Asian LNG market and propel it from the current 14th ranking among the world’s LNG producers to one of the top five. The project was originally scheduled to start production in 2008 and has been delayed due to environmental approvals, while rising construction costs have increased the probable cost.

“The joint venture partners have said for some time now that the Gorgon project is confronted with the overheated global construction market for large capital projects and that the partners are addressing the significant challenges to cost and schedule,” Chevron said in the e-mail. The partners “are doing additional study work to offset cost increases and mitigate some of the uncertainty before a final investment decision is considered.”

Chevron has 50 percent of the Gorgon venture, while Exxon Mobil and Shell each have 25 percent. The Western Australian government is yet to grant development approval to build an LNG production plant on Barrow Island, a nature reserve off the Western Australian coast.


The uncertainty about the project’s timetable is raising questions about how other proposed LNG projects in Australia such as Inpex Holdings Inc.’s Ichthys project and Woodside Petroleum Ltd.’s Browse project may be similarly affected, Frank Harris, co-head of global LNG at Wood Mackenzie Consultants Ltd. said Sept. 27 in an e-mail.

“The ongoing uncertainties at Gorgon are undoubtedly making LNG purchasers edgy,” Harris said. “However, Pacific Basin purchasers have few options other than Australia in the next few years so I think the outlook is still pretty good.”

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at [email protected] .

Last Updated: September 29, 2006 07:08 EDT


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